Solar Energy Stocks Are Under Circumstantial Stress, But They’ll Recover

Solar energy stocks are sliding. At first glance, the move appears reflective of the broader market, and it makes sense given solar energy’s place at the meeting point of tech and commodities. However, the issue is more condensed. Because of a company called Auxin Solar and a subsequent U.S. government investigation, solar energy stocks are having difficulty staying afloat.

Given that the stress on the young industry is circumstantial, its chance of recovery—and growth in a reconfigured subsector—is likely.

In March 2022, American solar energy company Auxin Solar filed a complaint with the U.S. Department of Commerce. Through a petition, Auxin claimed Chinese solar panel companies were avoiding Obama-era tariffs instituted to bolster domestic manufacturers.

The department followed up with an investigation into the claims that Chinese companies were funneling their products through other Asian countries before coming to the U.S., hindering American solar manufacturers. Beijing subsidizes the nation’s solar manufacturers, allowing the companies to charge less than their American competition.

All of this is resulting in tough times for solar energy companies. The Commerce Department is threatening to impose retroactive tariffs, and solar parts prices are increasing as a result. Meanwhile, solar imports from southeast Asian countries (including Thailand, Vietnam, Cambodia, and Malaysia) have been frozen. This move puts a pause on 82 percent of the U.S. solar panels supply.

The Invesco Solar ETF (TAN), which tracks an index of global solar energy companies, had fallen 4.66 percent by 10:17 a.m. ET on May 9. This amounts to a 15.71 percent drop from April 19 for TAN. While the fund doesn’t represent all solar energy stocks, it reflects the state of the industry.

Naturally, solar energy industry leaders are sounding the alarm on Auxin and the Commerce Department investigation. In fact, some people are suggesting Auxin CEO Mamun Rashid may be taking money for his legal bills from oil or gas companies that want to stunt the solar industry. At this point, it’s a rumor—but it goes to show how much Rashid has ostracized himself and his company. Still, Rashid sticks to his guns, stating, “We don’t have a business if we don’t do something about this.”

Joe Biden has already shouted his goal of halving solar power costs by 2030. These goals can (and often do) get pushed back. Plus, this backward momentum has undoubtedly caused issues for stocks such as SolarEdge Technologies (SEDG), Enphase Energy (ENPH), First Solar (FSLR), and many more.

Whereas one outlook suggests that solar energy stocks have a long road ahead of them, another views the governmental interference as providing a stronger domestic foundation (and a repaired solar-focused relationship with southeast Asian nations). Granted, the Commerce Department investigation should be paired with a simultaneous look into Auxin's money flow as the small company bankrolls major legal action.

Whatever the case, renewable energy is a necessity as private and public institutions look beyond fossil fuels, meaning solar energy stocks can—and will—recover in the long term.